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Bank run on Silicon Valley Bank

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Re: Bank run on Silicon Valley Bank

#791

Post by kentonv »

nostrademons wrote: post #662
kentonv wrote: post #375

Earlier quoted context omitted.

To add to the other comments, SVB also courts startup founders for their private banking arm, and there, too, the benefit is that they actually understand startup founders. Example: After our startup went up in flames in 2017 my wife and I (co-founders) got "regular jobs" with nice salaries. Some time later, we tried to refinance our mortgage with Chase. The banker at Chase was very happy to serve us right up until t…

I was in a similar situation when my startup went up in flames and I went to get a mortgage, but I just showed the bank copies of the dissolution paperwork and they accepted that without any further questions. If a startup really is defunct it usually makes sense to formally dissolve it - otherwise you're on the hook for franchise taxes, registered agent fees, etc, and those can add up after a few years.

The company still existed at the time because we were still operating our paid service in maintenance mode for a while since we didn't want to cut people off. (The cash flow involved was trivial.)

Funnily, we ended up not being able to dissolve for 5 years because some dude decided to sue us (though this actually happened after Chase turned down the refi). I'm not going to get into the details except to say eventually his lawyer withdrew, he was self-representing, and then he didn't show up for court appearances, and so it was dismissed. 5 years later. This also did not bother SVB, when they looked at the details.

Anyway we finally dissolved last year.

Re: Bank run on Silicon Valley Bank

#792

Post by wpietri »

subroutine wrote: post #625
piva00 wrote: post #619

Earlier quoted context omitted.

One is still standing, the other seems to be insolvent.

Indeed, SVB is still standing while JP Morgan Chase got a $25 billion dollar bailout in 2008. https://money.cnn.com/news/specials/storysupplement/bankbail...

And they are also so good at due diligence that they got scammed for $175 million: https://www.forbes.com/sites/alexandralevine/2023/01/11/jp-m...

Re: Bank run on Silicon Valley Bank

#793

Post by garyrob »

leoh wrote: post #609
rippercushions wrote: post #15

From https://techcrunch.com/2023/03/09/silicon-valley-banks-share... : Becker said the bank has “ample liquidity” to support its clients “with one exception: If everybody is telling each other that SVB is in trouble, that will be a challenge.” Pro tip: if you're CEO of a bank that's facing a bank run, don't tell the press that you'll be in trouble if everybody takes their money out.

To be fair, he is dealing with a slightly more sophisticated clientele than the masses that typically make a run on a bank who would (hopefully) realize that their shared success is contingent upon rational, pareto-optimal behavior; which is to say — if folks make a run on SV Bank, it’s pretty much going to be a shit show as to who comes out on top/who doesn’t.

Classic tragedy of the commons.

Re: Bank run on Silicon Valley Bank

#794

Post by kentonv »

trogdor wrote: post #695
subroutine wrote: post #621

Earlier quoted context omitted.

How? I'm no banker, but to me their financial picture reads: married couple, both currently have nice salary working at companies X and Y, together have proven ability to raise millions in capital. I would say yes please take our refi loan, and do come back if you need anything else.

Why would a proven ability to raise millions in business capital (and, apparently, to subsequently hemorrhage it) make someone a better credit risk for their home mortgage? Their financial history includes borrowing lots of money, taking a big risk, and losing a lot of that money. Not necessarily bad, but it’s reality. Just because that activity happened under a different legal entity doesn’t make it irrelevant. The…

Raising capital and then burning it all is what most startups do. Investors put in money knowing this was the most likely outcome. The whole point of the C corp is to keep the investor money isolated from personal money.

I'm disappointed that we failed but I think it shouldn't affect our personal credit one way or the other.

Re: Bank run on Silicon Valley Bank

#795

Post by ajross »

amluto wrote: post #578
ajross wrote: post #552

Earlier quoted context omitted.

> If SVB is sitting on a pile of Treasury bonds that mature in 20 years, they can “hold to maturity” and get their principal plus some very low interest rate. But this is useless! No it isn't. Any other bank would be happy to write a loan backed by US treasury holdings, at no more than a moderate profit. If you're sitting on that, it has value. But it doesn't have value in literal dollars by tomorrow morning to pay o…

I’m not saying the T bond is useless. I’m saying that the fact that it’s nominally worth a specific amount in the future if I hold it is useless. This has nothing to do with liquidity. If I had a 0 interest, $100 T bond maturing in 30 years, I cannot sell it today for $100. But anyone who lent me $90, nonrecourse, using it as collateral and asking for only a moderate profit is nuts because this bond is not worth $90…

> this bond is not worth $90

Not to a retail investor looking at short term returns (and irrationally obsessed with Inflation! due to media consumption), but to a bank with regulatory deposit requirements and a longer term outlook? Seems not unreasonable.

Anyway it doesn't have to be worth the full face value. It just needs to be worth enough to back a short term loan big enough to honor current withdrawal demands.

Re: Bank run on Silicon Valley Bank

#796

Post by jen20 »

tootie wrote: post #789
jen20 wrote: post #524

Earlier quoted context omitted.

They might know how to, but they choose not to.

In that case it would just SVB has a much higher risk tolerance and it seems that may have bitten them in the ass.

Indeed: this may portend a very rough few years for small businesses of any type and location being able to access the kind of banking services they have been able to until now.

Re: Bank run on Silicon Valley Bank

#797

Post by gadders »

MengerSponge wrote: post #783
gadders wrote: post #746

Earlier quoted context omitted.

No, by outspending them militarily, encouraging Solidarity in Poland, and forcing Gobarchev to realise the inevitable.

Encouraging Solidarity in Poland was the right call, but it's not likely that different leaders would have opposed it. "Neither the strong nor the weak version of the proposition that American defense spending bankrupted the Soviet economy and forced an end to the Cold War is sustained by the evidence." https://www.theatlantic.com/past/docs/politics/foreign/reagr...

I hardly think you can expect an unbiassed opinion from Gorbachev.

Re: Bank run on Silicon Valley Bank

#799

Post by RC_ITR »

nradov wrote: post #440
RC_ITR wrote: post #364

Earlier quoted context omitted.

The point is not what you’re assuming it to be. The point is that a bank run is a liquidity event (i.e. we still own more than what we owe, it’s just hard to turn it into cash fast enough). SVB has a fine balance sheet for now, they’re just running out of easy things to sell. The quote is referencing liquidity events, where the problem is everyone wants their money because they’re nervous about the bank, but the only…

No, you missed the point and that's not what I'm assuming. What you're stating is still not really actionable. Like what else specifically should he have said?

Again, the point is the only thing to say is theres no problem

There’s no deeper point.

Re: Bank run on Silicon Valley Bank

#800

Post by [deleted] »

amluto wrote: post #483
RC_ITR wrote: post #364

Earlier quoted context omitted.

The point is not what you’re assuming it to be. The point is that a bank run is a liquidity event (i.e. we still own more than what we owe, it’s just hard to turn it into cash fast enough). SVB has a fine balance sheet for now, they’re just running out of easy things to sell. The quote is referencing liquidity events, where the problem is everyone wants their money because they’re nervous about the bank, but the only…

> SVB has a fine balance sheet for now, they’re just running out of easy things to sell. Do they? If SVB is sitting on a pile of Treasury bonds that mature in 20 years, they can “hold to maturity” and get their principal plus some very low interest rate. But this is useless! In a fantasy world in which all their depositors leave and they keep those bonds for 20 years, they are indeed worth that amount in 20 years, wh…

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